134

5 Words That Change Everything

Prepare yourself ... because few topics spark as fiery of a debate as the one we're going to discuss today.

What's your take?In just a second, you can tell all of us exactly how you see things playing out. You can even rant about our government until you're blue (or red) in the face.

But first, a few points.

When President Obama signed the American Recovery and Reinvestment Act of 2009 into law, nearly $79 billion was set aside for renewable energy. Politics aside, that's an awful lot of money. And it may just be the beginning.

Don't forget, Obama pledged to "help create 5 million new jobs by strategically investing $150 billion over the next 10 years" and to "ensure 10% of our electricity comes from renewable sources by 2012, and 25% by 2025."

Fuzzy math?According to Management Information Services, a Washington, D.C.-based economic research firm, between 1950 and 2003, U.S. federal government subsidies for renewable energy were approximately $111 billion -- meaning Obama is going to invest more in one decade than we previously had in more than half a century.

This looks like a major win for green energy -- and companies from FPL Group (NYSE: FPL) to Edison International (NYSE: EIX) and First Solar (Nasdaq: FSLR) . But it pays to dig a little deeper.

When you do, you discover -- among other things -- that according to the Department of Energy, renewable sources accounted for 9% of electricity generation in 2008. That means Obama has three years to move the dial by just 1 percentage point.

Pot, kettle, blackEarlier this year, an article in The Huffington Post called out a similar discrepancy in Obama's rhetoric: "If this is how the impressive sounding goal of 'doubling alternative energy' is calculated, what Obama is essentially pledging is to simply maintain business-as-usual growth."

Combine this with the fact that oil prices have been cut in half, and that even wind super-evangelist T. Boone Pickens' now says the U.S. doesn't have the infrastructure needed to get clean energy to market, and you begin to realize why some people aren't jumping on the alternative-energy bandwagon.

5 words that will knock you off the fenceI admit, I love the idea of a stiff breeze charging my iPhone and a sunny afternoon lighting up Manhattan at night. But when it comes to green investing, I've been a bit of a skeptic lately. That is, until I opened The Wall Street Journal last month and saw this line:

"The money is coming back."

That's according to Ethan Zindler, head of North American research at New Energy Finance Ltd. And frankly, it's a bit of an understatement.

After all, Morgan Stanley (NYSE: MS) and Citigroup (NYSE: C) each took advantage of new federal incentives to invest more than $100 million in wind farms in August alone. Meanwhile, Spanish Iberdrola SA is throwing around cash-grant numbers in the $500 million range and is planning on investing another $2 billion.

And now even GE (NYSE: GE) is getting back into the game. It tells The Wall Street Journal, "We see opportunities and are pursuing them actively."

So are we -- and so can youThere are plenty of ways to play the clean-energy craze -- such as buying shares of Vestas or LDK Solar (NYSE: LDK) . But our Motley Fool Hidden Gems team is busy uncovering less obvious -- and potentially much more profitable -- opportunities.

Primarily, they're looking for small, ignored, or overlooked companies with explosive growth potential. One that fits the bill is Jinpan International -- a Chinese company that makes cast-resin transformers. These require only a fraction of the upkeep of their oil-based predecessors. And because many wind farms are being built in desolate, hostile environments -- including some hundreds of miles offshore -- they're in very high demand.

In fact, over the past two years, Jinpan's wind products have gone from accounting for less than 1% of revenue to more than 13% -- and over the past five years, the top line has had an impressive 30% compound annual growth rate. Here are a few more favorable metrics.

Not a one-trick ponyWind isn't the only thing propelling Jinpan's growth, either. As part of its most recent "five-year plan," China is investing $65 billion in its medium-voltage electricity network, and China's Ministry of Machinery has very strict regulations that require all transformers in public buildings to be made of, you guessed it ... cast resin. So you can see why the folks on our Hidden Gems team are so excited.

But Jinpan isn't the only amazing clean-energy play they've uncovered. Another compelling opportunity, Otter Tail, has a major foothold in the "Saudi Arabia of wind" and pays a healthy 5% dividend.

Take the next stepNow I want you to use the comments section below to tell us if -- and how -- you are playing the clean-energy craze.

And because electricity -- clean or not -- doesn't pay for itself, I'm going to invite you to join Hidden Gemsabsolutely free for 30 days. Stay with us if you like it; pay nothing if you don't.

Either way, you'll get full access to all of our top small-cap stock picks and research, plus you can follow along as Motley Fool senior analysts Seth Jayson and Andy Cross use $250,000 of our own money to build a best-of-the-best small-cap portfolio.

Austin Edwardsdoesn't own shares of any of the companies mentioned. Jinpan International and Otter Tail are Motley Fool Hidden Gems recommendation. First Solar is a Motley Fool Rule Breakers selection.The Fool is investors writing for investors and has adisclosure policy.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

I have about 20% of my investments in clean energy, ranging from more traditional like FPL to more exotic like APWR. The top 5 or 10 solar companies should be OK long-term, while others may drop by the wayside. I'm placing a few thousand dollars into solar stock options every quarter, and only breaking even so far but will continue. Also driving all-electric MINI-E number 411 and it's really a great car. And by the way I'm glad our government is helping push us through some of the start-up costs of establishing a new clean energy economy. It's not as if we haven't helped out the oil and gas companies for the last 100 years, you know. We BETTER keep up with China's green energy drive or America will look like a has-been.

If electric cars are in fact coming in a couple of years, and if they can actually be sold in large numbers (does not look good for GM Volt - too expensive), then this could be a good time to buy stocks that are related to this new mode of transport. Accordingly, I have been accumulating shares in D which generates electricity (and has a very good dividend), and ABAT that has some very interesting ways to store electricity once produced.

I drive between Bakersfield, Ca. and Mojave on my way to and from Vegas. This is Highway 58 and there are a large number of Windmills generating (supposedly) profitably for many years. I have been doing this for 20 years. I see many broken ones. Sometimes, a whole turbine propeller will break loose and fly off to the road. This windfarm has been there many years and I always wonder what the economics of this have been. There must be some data. I like to count the turbines that are not turning in the wind. I am very skeptical.

I've been in CREE for a while now and have been particularly rewarded lately. Companies like Jinpan and Cree that make components that show up in other energy plays and have other businesses seem like a good balance of the green energy gamble and some safety rooted in their existing, good businesses.

jwurms write that he subscribes to the "hook" of Hidden Gems as do I as well as Stock Advisor, Motley Fool Pro and Million Dollar Portfolio. When I read these "hook" pieces I immediately run to the advisory service that they are touting and I find nothing to help me decipher which stocks are being recommended by the "hook" nor do I find the "hook" stocks recommended in the regular advice.

I am beginning to wonder if we are all being Foolish following what use to be a customer driven group and now may have succumbed as much to the lure of my Big Bucks as any brokerage house of the past.

When you sign into the Hidden Gems members site, click on the "Recommendations" tab at the top. Underneath you will see several links. One is for "Classic Scorecard" (the stocks the team picked prior to starting their real money portfolio). Click on that and you will see every stock ever recommended in Hidden Gems, including Jinpan and Otter Tail. To get the full write up and analysis click the ticker symbol of the company next to its name on that page.

While the Gems team hasn't bought either stock yet for their real money portfolio, both are on the watch list, as you will see once you click through to the full write-up.

Since 1980 the electricity for our rural home has come from a combination of windmill and solar panels. I have also earned my living selling this equipment to other folks that live beyond the power lines.

Renewable energy is going to be big business, it already is a good sized industry and it's accelerating fast. The little hippie business I started working for 30 years ago has become one that did 50 million dollars in business during 2008,the year the money dried up. Not bad by my book!

Consider this, I have read that there are about 1000 square miles of roof in the USA. That is a huge amount of potential power generated right where it's used. That's also a lot of solar panels, inverters and other equipment to be sold.

Some of my "green" stock picks have multiplied several times, some have tanked and some haven't done either but overall I am still ahead of the game and expect to do better in the future.

Regardless of politics, renewable energy is needed, because sooner or later we're going to run out of other ways to generate energy.

Governments around the world are investing a whole pile of taxpayers money to not only give the green energy industry a critical mass to get started but give it the momentum to become a long-term trend.

oil is cheap. and will be for the next 100 plus years. ride a bike if you want to but the world will compete on oil until it is bone dry. timeing is everything but we are not even close to producing anything anywhere near the low price of oil based energy. and when the time comes...which is NOW for the next generation, nuclear power is hands down the cheapist, easiest, safeist source of energy. double the output over the next 10 years and you will reduce the eqivalent of carbon output produced by all the cars in America. it may feel good for the "inhale" crowd to talk green. but if you want your money green keep your eye on the well and the atom. just my take.

Again, both of these companies have thoroughly been covered by our Gems team.

To get to their coverage, simply do the following...

When you sign into the Hidden Gems members site, click on the "Recommendations" tab at the top. Underneath you will see several links. One is for "Classic Scorecard" (the stocks the team picked prior to starting their real money portfolio). Click on that and you will see every stock ever recommended in Hidden Gems, including Jinpan and Otter Tail. To get the full write up and analysis click the ticker symbol of the company next to its name on that page.

While the Gems team hasn't bought either stock yet for their real money portfolio, both are on the watch list, as you will see once you click through to the full write-up.

I hold some American Superconductor (AMSC). They have a wind turbine unit , a unit that builds conventionally wound load balancing transformers and electronics to go with both of them.

They also have the superconducting technology which moves electricity much more efficiently than conventional transmission lines.

They have licensing deals for all of the above product lines in China and for the first two India, and Europe. I'd venture to say that the majority of their income is coming from outside the U. S.

They recently completed a test of superconducting motors for Naval ships. The Navy was quite pleased. Next up is the first superconducting wind turbine. The little test model will be 5 MW, three times more power than the average 1.65 MW units being installed today. I can easily see 10 MW or larger actual production units a few years down the road. Granted superconducting units cannot be installed just anywhere but they should be practical most of North America, Europe and parts of Asia.

I like Jinpan with its 10 P/E. I have been wanting to get into wind plays since that's what the US will rely on with places like ND and SD capable of producing enough wind energy to power the US! I am skeptical of solar since margins are razor thin and manufacturers are selling panels below cost. That's not an industry I want to get into.

Any business with the taint of Federal money is immediately suspect. If it is a good idea that might be profitable, then the company should find investors other than the Feds. .It is immoral for the government to partner with ANY business. It undermines everyone's best interest and reeks of pandering to lobbyists as well as cronyism.

@dancinglight in general I would agree with you. However the feds know we've hit peak oil, and by the time oil shoots through the roof, it will be too late for private $ to get behind renewables in a meaningful way. So they (the feds) are in their own special way at least trying to do the right thing I think. It will most likely be too little too late however.

With that said, dancinglight and chipm, straight oil sounds ever so good!

The thing that is alarming is how the White House is talking, the healthcare thing is only about 3.5% of everything they have planned. Then to hear the one D-Senator spouting about taking over and managing oil.

Question everything while we can.

I think I will stay with oil anyway as it is the meat and bones of daily living. Call it a political sin-stock or sin-to-own or not, it is just that---a necessary evil.

Reminds me of a saying, "The love of money is the root of all evil," and it's twisted sister, "Money is the root of all evil and we are all in there rooting for it."

I have a small position in BP, which I think is the best of both worlds. A straight oil play, with huge finds in the gulf of Mexico, along with a decent amount of play into various alternative energy & nat gas. Not to mention the great dividend. I bought at $39.80 in Feb or March & it's up about 38% plus dividends. Unfortunatly I couldn't buy more because the money I use for stock purchases comes from an Oil Royalty Trust & the dividend payments have been way off this year, so it's not all golden. I'm starting to look into wind & other alternatives, but I might just stick with BP.

It isn't a good idea to invest in a technology that can only grow because of subsidies. Economy of scale alone will not make some of these technologies viable. The only "green" source of energy that can accommodate growth as well as replace older generation technology is nuclear power. Batteries suitable for automobiles have been one invention away from viability for 70 years at least. I don't see a near-term solution. The Volt may be expensive, but even it is going to start out as a money-loser.

Usually, banks involved in energy investment banking would incorporate a lot of add-ons to the investment to benefit the client and hasten the project's commencement. For example, a qualified research project that would aim to harness the sun's energy would need new technologies to concentrate the diffused solar energy. These gadgets are usually expensive and require expertise. Allowing the clients to acquire these machines, therefore, would propel the study and hasten the possible energy production.

Clients of these banks with energy investment banking services usually include a wide range of entities that may be simple scientists who need funds to support their project or large institutions and governments trying to find ways to solve their own energy requirements. It is therefore necessary for these types of banks to create services that would be accessible to different clients. A good bank of this genre can easily combine the principles of banking with the concepts of science to provide economic, as well as ecological, solutions to various scientific or government energy problems.

Just remember, before you attack everybody but yourself, that all the "assets" (read debt) traded by Lehman and others in all those exotic, now toxic "financial instruments" are made up from our excessive consumer debt loans. For us Americans to have been able to spend so much for so long we had to have access to all those easy loans and -oh boy- didn't we abuse those easy loans in an orgy of spending. What really has happened is that the easy money has dried up and it is payback time. Now everybody blames everybody else but themselves for the stomach ache. Nobody forced us to splurge and over eat - we did it to ourselves and we find the doctors remedy (credit crunch) really painful. Ha Ha

I agree, nuclear is the way to go. How many (actually, how few) reactors would it take to replace all of those ugly wind turbines? In some cases, yes they have their place as solarfool314 pointed out. Something that I never see mentioned with wind turbines, is that for them to be efficient, they need a constant, steady wind. That's why the offshore and coastal areas are best. Everyone thinks that places like Wyoming and North and South Dakota are such ideal sources of wind power, but they often sit idle for long periods of time because there is either no wind, or too much. These alternative sources of energy each have their niche, but I don't foresee them becoming the replacement energy of the future. And why doesn't geothermal energy get as much play time as wind and solar?

To the very short sighted person ( MCA2009 ) that thinks the money was wasted in the Iraq war, consider this. Saddam had easy access to enough capital to purchase the first nuclear weapon that becomes available on the market. He also had the resources to ship it into New York city. He was undoubtably motivated to do so.

How much would you pay to prevent this?

Our economy relies on our security. If we are proven vulnerable in this way, we would never, ever recover.

This is only the economic aspect of the reason we spent so much to remove Saddam. Other reasons include the fact that a real man doesn't stand by and watch people get gassed when he has the capability to stop it. Grow a pair...

@spindog: hahaha! You really think the Iraq war had anything to do with Saddam & nukes? Wow.It was all about oil - always was.

Nuclear power is fine and we should use it, but you tell me how we're ever going to plug a 737 into an electric outlet and be able to fly. It can't replace fossil fuels everywhere.

@marhu: wrong about too late? discouraging free market? Well if oil were unlimited we wouldn't be having this discussion. so I'm not sure I follow.

Look I love free markets and they work MOST of the time. But when the liquid that has allowed the boom for the past 150 years is suddenly going to run out, and all of our infrastructure is based on that liquid being cheaply available forever, free markets are gonna have problems, at least in the short time. What do we do in the meantime, just enjoy the darkness? (Well what I will do as an investor is invest in oil and enjoy the great profits of what is left)

79 billion is not a lot of money in todays economy. It is a year and a half in Iraq. Comparing dollar for dollar spent from 1950 to 2003 and 79 billion without adding for inflation is a little disenguous. I also would get so up on JinPan or any other Chinese company that manufactures anything. They simply don't have it outside of textiles and clothes. Their stuff just doesn't hold up and I know from buying things made in China. Anyone depending on replacing transformers made in China had better keep the maintainance dept fully staffed.

Don't get me wrong I am all for wind and solar but I don't see where the jobs are going to come from for the average American. These are not labor ready intensive industries.

Solar, wind are fine, the money to be made is in the storage of the energy produced so it can be produced when the sun is shining and wind is blowing but used when needed. Batteries are nice but cost more than the energy savings and don't last forever. Pumping water uphill and then using the hydroelectric power is one useful trick. Also heating up water and storing it up in insulated tanks for use later to heat buildings or for regular hot water use. This can be done at each house, have large, well insulated water tanks and circulate for heat or bathing, washing as needed. Another way to store the energy without batteries is to use solar or wind to produce hydrogen via electrolysis and then use it as needed. I'm thinking a "heat engine" for cars where you compress air using intermittent power sources such as wind, sun and then using the ambient temperature to vaporize it rapidly for turbines to operate the car. Nuclear energy is not a long term solution as some people think, we actually have much larger coal reserves than uranium supplies. Disclosures: I own AAPL (a lot), CISCO, DEERE, HOG, Intel, Lowes, Merck, Pepsi, PG, Baxter, MSFT (but just a little from the old days that I bought before Vista), all my accounts are higher than before the crash of Sept/Oct 2008 and higher than the high of Sept 2007. I am protecting my positions by selling covered calls which does limit the upside (I've had to roll up Apple several times) but has been making steady gains as I put the money from the calls into additional shares. I'm riding everything on equities at the moment. I am not a believer of buy and hold, but have made the resolve to make all investment decisions on "What is the position worth now and what can I expect to earn on it in the next year or so?" I'm reworking my house to save energy, with metal roof, cisterns, solar, etc. We (family partnership/farm) are holding real estate, I think it will come back around.....Does anyone have any idea why the Deere options are so good? Also, any opinions on the CISCO and Intel in the next year or so? JS

ditto on carbon tax ..BUT .. mouth of mine, port of entry, well head only .. then, let the market dynamics work out optimum choices. .. and , ditto on all non renewables .. tax 'em with a predictable phased in escalating scale over ..say .. the next 10 to 20 years with a goal of gov't solvency.. ps, love my cng truck!!! edp

I majored in math and science. I took Climatology back in the sixties. My impression of what we understand about Climate was the data was too skimpy to tell us much of anything. My opinion has not changed since then. The are many variable that come into play when trying to predict what the future climate changes will be, and man has very little control over them. We cannot tell a Volcano when to erupt or the sun to send out flares, earthquakes when to happen, chnge the shape of the earth's orbit around the sun, or the wobble of the earth's axis, etc., etc, etc... Because we may know what climate may have been in one location on earth via tree rings or ice cores, that does not tell us what the climate was anywhere else at those times. The models that the Global Warming Alarmist all use assume positive feedback which exagerates the direction of climate change. Engineers design system with negative feed back. That way stability is maintained. Finally, matheticians will tell you that using a short interval of skimpy data to use it to extrapolate backwards or forwards in time is fools work.

My conclusion we should invest in Nuclear Energy, Natural Gas, and Coal and not worry about the CO2. It is not poison! We should not confusion polution with climate.

I think that most TMF writers would have laughed (as did I) at the "college level writing skills" demonstrated in mikecart1's comment posted on September 17, 2009, at 1:42 PM. Otherwise, I think this article was interesting, at best.

Like almost all other recent Motley Fool articles, this one is just another solicitation meant to encourage readers to give to the community by taking some action: express an opinion about investments (something Motley Fool writers used to do) and/or try and buy a Motley Fool subscription, in order to generate income.

If a reader is being asked to give, that reader should have every reason to expect to receive something of equal or greater value in return, and this article has failed to outline the value of any possible returns gained by the readers who take action.

Since I joined Motley Fool with the understanding that Motley Fool would be giving me something, rather than only me just giving and giving (with minimal return from Motley Fool), I'm electing to do neither.

> I majored in math and science. I took Climatology back in the sixties. My impression of what we understand about Climate was the data was too skimpy to tell us much of anything. My opinion has not changed since then.

However, the science has moved on significantly since the sixties, and a 40-year-old undergrad course background is probably inadequate to objectively examine the long term data collected since then.

> The models that the Global Warming Alarmist all use assume positive feedback which exagerates the direction of climate change. Engineers design system with negative feed back. That way stability is maintained.

If you are positing that the earth's capability to forever absorb carbon was not designed by a human engineer, I agree whole-heartedly.

> Finally, matheticians will tell you that using a short interval of skimpy data to use it to extrapolate backwards or forwards in time is fools work.

How many more millennia of ice core records of carbon and oxygen isotopes would you like?

For wind farm speculation, try ZOLT. They provide most of the carbon fiber for the blades. There are also many other emerging opportunities for carbon to replace steel in diverse applications. Look into it.